Financial inclusion is a key determinant of sustainable and inclusive growth, says Finance Minister

January 18, 2011: Welcoming the financial sector stakeholders, Finance Minister, Shri Pranab Mukherjee said that the group present there is working in diverse areas including banking, capital markets, insurance, infrastructure finance, rural credit, housing finance and micro-finance and many of their efforts are concentrated in less developed regions of the country.

Shri Mukherjee emphasized that financial inclusion is a key determinant of sustainable and inclusive growth. Access to affordable financial services - especially credit and insurance - enlarges livelihood opportunities and empowers the poor to take charge of their lives. It is critical to connect the banked and the unbanked sectors and enable the unbanked to become vibrant and productive participants in the process of economic growth. The Government has accorded high importance to financial inclusion to cover the entire gamut of financial services pertaining to savings, credit, insurance and transfers, he added.

Shri Mukherjee said that in the post-crisis period, financial stability has become an integral part of policy discussions and macroeconomic objectives globally. It refers to a robust functioning of various financial system components markets, institutions and market infrastructure. A sound and resilient banking sector, well-functioning financial markets, robust liquidity management and payment and settlement infrastructure are the pre-requisites for financial stability, he said.

The Minister said that as a part of the reforms in the financial sector in India, an apex-level Financial Stability and Development Council (FSDC) have been set up with a view to strengthen and institutionalise the mechanism for maintaining financial stability. Without prejudice to the autonomy of market regulators, this Council would undertake macro prudential supervision of the economy and address inter-regulatory coordination issues. It would also focus on financial literacy and financial inclusion. It has also been decided to set-up a Financial Sector Legislative Reforms Commission (FSLRC) to rewrite and clean up the financial sector laws and bring them in line with the requirements of the sector, he said.

Finance Minister said that the banking system has come into sharper focus after the global crisis. The fact that India has not gone through any financial turbulence, as a result of the earlier phase of financial deregulation is a testimony to our consistent view that reforms in global standards have to be adapted to local conditions. However, the cost of banking intermediaries in India is high and bank penetration is limited to only a few customer segments and geographies. The Minister said that the Government is trying to address this in collaboration with the Reserve Bank of India, but much more is needed to be done.

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